A PROJECT REPORT ON ESTIMATED FRAUDS IN BANKING SECTOR RELATED TO ICICI BANK AND HDFC BANK

SUBMITTED BY Miss.Karishma G. kharat

T.Y.BBI SEM-V (2012-2013)

UNDER THE GUIDANCE OF Prof. kajal D.chheda

GURUKUL COLLEGE OF COMMERCE AFFILIATED TO UNIVERSITY OF MUMBAI TILAK ROAD, GHATKOPAR (E) MUMBAI 400077.

Declaration

I, karishma kharat

Student of B.com-Banking and insurance-Semester VI (2012-2013) hereby declare that I have completed the project on Estimated frauds in banking sector related to ICICI Bank and HDFC Bank.

Wherever the data/ information have been taken from any book or other sources the same have mentioned in the bibliography.

The information submitted is true and original to the best of my knowledge.

Signature of the student.

Karishma kharat

Acknowledgement

In order to complete a bouquet a person has to collect some decorative material, flowers, etc. similarly in order to complete this bouquet like project it was necessary to collect flower like information and while completing this bouquet. I came across many florists who provided me flowers of information. I would like to share about florists that have played a part in competition of my bouquet like project.

I am grateful to our principal MRS.DR kshitij prabha for her support in completion of this project. I specially thanks to college library for providing with various knowledgeable books, magazines on my project.

I express my gratitude towards my project guide prof. kajal D Chheda. Who made my confident to choose this topic and helped me to get the information and also to go ahead with the preparation of the project.

I would express indebtedness to my parents and friends and those all who have helped me directly or indirectly with their constant support and for infusing me with enthusiasm and achieve the bouquet successfully.

Mumbai Pradesh Arya Vidya Sabhas GURUKUL COLLEGE OF COMMERCE Tilak Road, Ghatkopar (East) Mumbai - 400077

CERTIFICATE This is to certify that KARISHMA KHARAT of Gurukul College of Commerce studying in TYBBI bearing Roll No.24 and Examination Seat No. _____ has successfully completed the project entitled EXTIMATED FRAUDS IN BANKING SECTOR WITH RESPECT TO ICICI AND HDFC BANK. as part of internal assignments under my supervision during the academic year 2012 2013.

----------------------------Prof. Nitin Agarwal (Co-ordinator)

-------------------Dr.Kshitij Prabha Principal

--------------------------------External Examiner College seal

--------------------Name of guide

Design of study:

1) Objectives:

The objective of study is enabling the researcher:

To understand the frauds in banking sector. To understand and analysis frauds in ICICI Bank and HDFC Bank. To know the precautions taken by the banking sector to overcome the frauds. To know the different type of frauds.

2) Scope:

The study of this project is restricted only up to ICICI Bank and HDFC Bank in India. The scope of this project study is frauds in banking sector.

It would help to find out the frauds done by the banks and the prevention and detection.

3) Research methodology:

Research methodology is designed in order to solve research problems. I have conducted a descriptive research to understand and develop knowledge on the frauds in banking sector in India. This research has made attempt:

To understand the estimated frauds in banking sector with respect to ICICI Bank and HDFC Bank in India.

Sources of data:

Primary data:

Primary data are those, which are collected afresh and for the first time, and thus happens to be original in character.

Secondary data:
Secondary data are those, which have already been collected by someone else and which have been passed through the statistical process. This data is collected from the following sources:

Report of ICICI Bank and HDFC Bank. Magazines Journals Newspapers Internet website

4) Limitations:

This project study is limited to the university of Mumbai guidelines.

 Adequate primary data was not available. As no bank would like to revel their negative sides.

Executive summary

Over the time, Banking customers have developed a preference for transacting through newer channels like payments cards and online banking over traditional banking channels. While these payment channels have the advantages of ease and speed of transacting, on the flip side, these very advantages make banks customers vulnerable to the ploys of fraudsters. This project focuses mainly on banking frauds done by ICICI Bank and HDFC Bank, probes the nature of these frauds and reveals the newer trends within these fraud types. The first chapter deals with introduction to bank, definition on bank frauds and what are bank frauds. The second chapter deals with introduction to ICICI Bank, corporate history, and key player to ICICI Bank, subsidiaries to ICICI Bank, frauds done by ICICI Bank and case study. The Third chapter deals with introduction to HDFC Bank, corporate history, business focuses of HDFC Bank and case study. The fourth and fifth chapter deals with types of frauds and mechanics of bank frauds. The sixth chapter deals with preventions of frauds and detection of frauds

INDEX
SR.NO CONTENT PAGE. NO.

1.

INTRODUCTION 1.1 Introduction of bank. 1.2 banking frauds. Introduction to ICICI Bank 2.1 corporate history. 2.2 key player of ICICI Bank. 2.3 Subsidiaries to ICICI Bank. 2.4 frauds done by ICICI Bank. 2.5 case study. INTRODUCTION TO HDFC BANK 3.1 Corporate history. 3.2 Business focuses. 3.3 frauds done by HDFC Bank. 3.4 case study. TYPES OF FRAUDS.

2.

3.

4.

5.

MACHANIES OF BANK FRAUDS.

6.

PREVENTION OF FRAUDS.

7.

DETECTION OF FRAUDS.

CONCLUSION.

INTRODUCTION

EVOLUTION OF BANKING SYSTEM IN INDIA:

Banking system occupies an important place in a nations economy. A banking institution is indispensable in a modern society. It plays a pivotal role in economic development of a country and forms the core of the money market in an advanced country. Banking industry in India has traversed a long way to assume its present stature. It has undergone a major structural transformation after the nationalization of 14major commercial banks in 1969 and 5 more on 15 April 1980.Banks are the engines that drive the operations in the financial sector, which is vital for the economy. With the nationalization of banks in 1969, they also have emerged as engines for social change. After In dep end en ce, the b ank s have passed through three stages. They have moved from the character based lending to ideology based lending to today competitiveness based lending in the context of India's economic liberalization policies and the process of linking with the global economy. A sound banking system should possess three basic characteristics to protect depositors interest and public faith. These are: (i)A fraud free culture, (ii) A time tested Best Practice Code, and (iii) An in house immediate grievance remedial system. All these conditions are their missing or extremely weak in India.

Section 5(b) of the Banking Regulation Act, 1949 d e f i n e s b a n k i n g a s Banking is the accepting for the purpose of lending or investment, deposits of money from the purpose of lending or investment, deposits of money from the public, repayable on demand or otherwise and withdraw able by cheque, draft, order or otherwise.I n the present day, Global Scenario Banking System has acquired new dimensions. Banking did spread in India. Today, the banking system has entered into competitive markets in areas covering resource mobilization, human resource development, customer services and credit management as well. With the rising banking business, frauds in banks are also increasing and the fraudsters are becoming more and more sophisticated and ingenious. In a bid to keep pace with the changing times, the banking sector has diversified its business manifold. Replacement of the philosophy of class banking with mass banking in the post-nationalization period has thrown a lot of challenges to the management on reconciling the social responsibility with economic viability. The banking system in our country has been taking care of all segments of our socio-economic set up. A bank fraud is a deliberate act of omission or commission by any person carried out in the course of banking transactions or in the books of accounts, resulting in wrongful gain to any p e r s o n f o r a temporary period or otherwise, with or without any monetary loss to the bank

Bank Frauds:

Definition of Fraud:
Fraud is defined as any behavior by which one person intends to gain a dishonest advantage over another. In other words, fraud is an act or omission which is intended to cause wrongful gain to one person and wrongful loss to the other, either by way of concealment of facts or otherwise. Fraud is defined u/s 421 of the Indian Penal Code and u/s 17 of the Indian Contract Act Thus essential elements of frauds are: 1. There must be a representation and assertion; 2. It must relate to a fact; 3. It must be with the knowledge that it is false or without belief in its truth; and 4. It must induce another to act upon the assertion in question or to do or not to do certain act. A false representation of a matter of fact whether by words or by conduct, by false or misleading allegations, or by concealment o f what should have been d i s c l o s e d t h a t d e c e i v e s a n d i s i n t e n d e d t o d e c e i v e a n o t h e r so that the individual will act upon it to her or his legal injury. In law, the deliberate misrepresentation of fact for the purpose of depriving someone of a valuable possession or legal right. Any omission

or concealment that is injurious to another or that allows a person to take unconscionable advantage of another may constitute criminal fraud. The most common type of fraud is the obtaining of property by giving a check for which there is insufficient funds in the signer's account. Another is the assumption of someone else's or a fictitious identity with the intent to deceive. Also important are mainland wire fraud (fraud committed by use of the postal service or electronic devices, such as telephones or computers). A tort action based on fraud is sometimes referred to as an action of deceit Losses sustained by banks as a result of frauds exceed the losses due to robbery, dacoit, burglary and theft-all put together. Unauthorized credit facilities are extended for illegal gratification such as case credit allowed against pledge of goods, hypothecation of goods against bills or against book debts. Common modus operandi are, pledging of spurious goods, inletting the value of goods, hypothecating goods to more than one bank, fraudulent removal of goods with the knowledge and connivance of in negligence of bank staff, pledging of goods belonging to a third party. While the operations of the bank have become increasingly significant, there is also an occupation hazard. There is a Tamil proverb, which says that a man who collects honey will always be tempted to lick his fingers. Banks are all the time dealing with money and the temptation should therefore is very high. Oscar Wilde said that the thief was an artist and the policeman was only a critic. There are many people who are unscrupulous and are able to perpetrate a fraud. We must be able to see that we devise our systems and procedures in such a way that the scope for such clever and unscrupulous people is reduced. Frauds in deposit accounts take place by opening of bogus accounts, forging signatures of introducers and collecting through such accounts stolen or forged cheques or bank drafts. Frauds are also committed in the area of granting overdraft facility in the current accounts of customers. A large number of frauds have been committed through bank draft, mail transfers and telegraphic transfers. An analysis made of cases brings out broadly the under mentioned four major elements responsible for the commission of frauds in banks

1. Active involvement of the staff-both supervisor and clerical either independent of external elements or in connivance with outsiders. 2. Failure on the part of the bank staff to follow meticulously laid down instructions and guidelines. 3. External elements perpetuating frauds on banks by forgeries or manipulations of cheques, drafts and other instruments. 4. There has been a growing collusion between business, top banks executives, civil servants and politicians in power to defraud the banks, by getting the rules bent, regulations flouted and banking norms thrown to the winds

ICICI BANK

Introduction
ICICI Bank Limited (NSE: ICICIBANK, BSE: 532174, NYSE: IBN) is an Indian diversified financial services company headquartered in Mumbai, Maharashtra. It is the second largest bank in India by assets and third largest by market capitalization. It offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries in the areas of investment banking, life and non-life insurance, venture capital and asset management. The Bank has a network of 2,630 branches and 8,003 ATM's in India, and has a presence in 19 countries, including India. The bank has subsidiaries in the United Kingdom, Russia, and Canada; branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre; and representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. The company's UK subsidiary has established branches in Belgium and Germany. ICICI Bank is one of the Big Four banks of India, along with State Bank of India, Punjab National Bank and Bank of Baroda

Type Traded as

Public BSE: 532174 NSE: ICICIBANK NYSE: IBN BSE SENSEX Constituent Banking, Financial services 1955 Worldwide K. V. Kamath (Chairman) Chanda Kochhar (MD & CEO) Credit cards, Consumer banking, corporate banking, finance and insurance, investment banking, mortgage loans, private banking, wealth management US$ 13.812 billion (2011)[1] US$ 1.366 billion (2011)[1] US$ 119.69 billion (2011)[1] US$ 12.401 billion (2011)[1] 79,978 (2011)[1] www.icicibank.com

Industry Founded Area served Key people

Headquarters Mumbai, Maharashtra, India

Products

Revenue Profit Total assets Total equity Employees Website

Corporate history
ICICI Bank - Leeds Branch ICICI Bank was established in 1996 by the Industrial Credit and Investment Corporation of India, an Indian financial institution, as a wholly owned subsidiary. The parent company was formed in 1955 as a joint-venture of the World Bank, India's public-sector banks and publicsector insurance companies to provide project financing to Indian industry. The bank was initially known as the Industrial Credit and Investment Corporation of India Bank, before it changed its name to the abbreviated ICICI Bank. The parent company was later merged into ICICI Bank. ICICI Bank launched internet banking operations in 1998. ICICI's shareholding in ICICI Bank was reduced to 46 percent, through a public offering of shares in India in 1998, followed by an equity offering in the form of American Depositary Receipts on the NYSE in 2000. ICICI Bank acquired the Bank of Madura Limited in an all-stock deal in 2001, and sold additional stakes to institutional investors during 2001-02. In the 1990s, ICICI transformed its business from a development financial institution offering only project finance to a diversified financial services group, offering a wide variety of products and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE.

In 2000, ICICI Bank became the first Indian bank to list on the New York Stock Exchange with its five million American depository shares issue generating a demand book 13 times the offer size. In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of ICICI and two of its wholly owned retail finance subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was approved by shareholders of ICICI and ICICI Bank in January 2002, by the High Court of Gujarat at Ahmadabad in March 2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India in April 2002. In 2008, following the 2008 financial crisis, customers rushed to ATM's and branches in some locations due to rumors of adverse financial position of ICICI Bank. The Reserve Bank of India issued a clarification on the financial strength of ICICI Bank to dispel the rumors Key players to ICICI bank

ICICI Bank has contributed to set up different institutions which include the following: National Stock Exchange
The National Stock Exchange was promoted by Indias leading financial institutions (including ICICI Ltd.) in 1992 on behalf of the Government of India with the objective of establishing a nationwide trading facility for equities, debt instruments and hybrids, by ensuring equal access to investors all over the country through an appropriate communication network.

Credit Rating Information Services of India Limited

In 1987, ICICI Ltd. along with UTI set up CRISIL as India's first professional credit rating agency. CRISIL offers a comprehensive range of integrated products and service offerings which include credit ratings, capital market information, industry analysis and detailed reports.

National Commodities and Derivatives Exchange Limited

NCDEX is a professionally managed online multi-commodity exchange, set up in 2003, by ICICI Bank Ltd, LIC, NABARD, NSE, Canara Bank, CRISIL, Goldman Sachs, Indian Farmers Fertilizer Cooperative Limited (IFFCO) and Punjab National Bank.

Financial Innovation Network and Operations Pvt Ltd.

ICICI Bank has facilitated setting up of "FINO Cross Link to Case Link Study" in 2006, as a company that would provide technology solutions and services to reach the underserved and under banked population of the country. Using cutting edge technologies like smart cards, biometrics and a basket of support services, FINO enables financial institutions to conceptualize, develop and operationalise projects to support sector initiatives in microfinance and livelihoods.

Entrepreneurship Development Institute of India

Entrepreneurship Development Institute of India (EDII), an autonomous body and not-for-profit society, was set up in 1983, by the erstwhile apex financial institutions like IDBI, ICICI, IFCI and SBI with the support of the Govt. of Gujarat as a national resource organization committed to entrepreneurship development, education, training and research.

North Eastern Development Finance Corporation

North Eastern Development Finance Corporation (NEDFI) was promoted by national level financial institutions like ICICI Ltd in 1995 at Guwahati, Assam for the development of industries, infrastructure, animal husbandry, agri-horticulture plantation, medicinal plants, sericulture, aquaculture, poultry and dairy in the North Eastern states of India. NEDFI is the premier financial and development institution for the North East region. Asset Reconstruction Company India Limited Following the enactment of the Securitizations Act in 2002, ICICI Bank together with other institutions, set up Asset Reconstruction Company India Limited (ARCIL) in 2003, to create a facilitative environment for the resolution of distressed debt in India. ARCIL was established to acquire non-performing assets (NPAs) from financial institutions and banks with a view to enhance the management of these assets and help in the maximization of recovery. This would relieve institutions and banks from the burden of pursuing NPAs, and allow them to focus on core banking activities.

Credit Information Bureau of India Limited

ICICI Bank has also helped in setting up Credit Information Bureau of India Limited (CIBIL), Indias first national credit bureau in 2000. CIBIL provides a repository of information (which contains the credit history of commercial and consumer borrowers) to its members in the form of credit information reports. The members of CIBIL include banks, financial institutions, state financial corporations, non-banking financial companies, housing finance companies and credit card companies

 Subsidiaries :
Domestic
ICICI Lombard ICICI Prudential Life Insurance Company Limited ICICI Securities Limited ICICI Prudential Asset Management Company Limited ICICI Venture ICICI Home Finance ICICI direct.com ICICI Foundation

International
ICICI Bank UK PLC ICICI Bank Canada ICICI Bank Eurasia LLC

Acquisitions
2005: Investitsionno-Kreditny Bank (IKB), a Russian bank 2007: Sangli Bank 2010: Bank of Rajasthan

Frauds done by ICICI bank:

In 2010, then Finance Minister of India, Pranab Mukherjee, said that private sector lenders including ICICI Bank and HDFC Bank have reportedly violated RBI guidelines on engagement of agents to recover loans. ICICI Bank has been in focus in recent years because of alleged harassment of customers by its recovery agents. ICICI Bank was fined Rs. 55 lakh for hiring goons (known colloquially as "gonads") to recover a loan. Recovery agents had, allegedly, forcibly dragged out a youth (who was not even the borrower) from the car, beaten him up with iron rods and left him bleeding as they drove away with the vehicle. "We hold ICICI Bank guilty of the grossest kind of deficiency in service and unfair trade practice for breach of terms of contract of hire-purchase/loan agreement by seizing the vehicle illegally,""Uncivilized society governed by the rule of law can brook such kind of conduct" said Justice Kaleem, who was born in Laddhawala, Muzaffarnagar is the president of the consumer commission Four ICICI loan employees arrested on theft charges in Punjab. ICICI Bank told to pay Rs. 1 lakh as compensation for using unlawful recovery methods. RBI warns ICICI Bank for coercive methods to recover loans. ICICI Bank drives customer to suicide - Four men including an employee of ICICI Bank booked under sections 452, 306, 506 (II) and 34 of IPC for abetting suicide. According to the suicide note they advised him, "If you cannot repay the bank loan, sell off your wife, your kids, yourself, sell everything at your home. Even then

if you cannot not pay back the due amount, then it's better if you commit suicide". Family of the deceased received compensation from the bank. ICICI Bank on huge car recovery scam in Goa - ICICI Bank invests in car-jackers to recover loans in Goa. A half an hour investigative report on CNN-IBN's 30 Minutes. The under-cover report was executed by CNN-IBN's Special Investigations Team from Mumbai, led by Ruksh Chatterji Family of Y. Yadaiah alleged that he was beaten to death by ICICI Banks recovery agents, for failing to pay the dues. Four persons were arrested in this case. A father while talking to Times of India alleged that "ICICI Bank recovery agents visited his house and threatened his family. And his son Nikhil consumed poison because of the tension". Oppressed by ICICI Bank's loan recovery agents, Shakuntala Joshi (38), committed suicide by hanging. The suicide note stated that she was upset with the ill-treatment meted out by ICICI Bank's recovery agents and had thus decided to end her life. In another case of a suicide it is alleged that goondas sent by ICICI Bank abused Himanshu and his wife in front of the entire residential colony before taking away his vehicle. Feeling frustrated and insulted, he reportedly committed suicide.

C.L.N Murthy, a scientist with the Hyderabad-based Indian Institute of Chemical Technology, was allegedly tortured by recovery agents of ICICI Bank after he defaulted on his loan.They humiliated me no end. They ripped my shirt, shaved my moustache, cut my hair and gave electric shocks on my chest and even spat on my face" adds Murthy. A dozen recovery agents of ICICI Bank, riding on bikes, allegedly forced a prominent lawyer, Someshwari Prasad, to stop his car. They held Prasad at gunpoint and also slapped him to force him. A manager of the ICICI Bank branch, Rakesh Mehta, along with four other employees were arrested.

 In a landmark case, Allahabad High Court had ordered registration of an FIR against ICICI Bank's branch manager, President, Chairman and Managing Director on a complaint of 75-year-old widow Prakash Kaur. She had complained that goondas were sent by the bank to harass her and forcibly took away her truck. When the Supreme Court wanted to know about the procedure adopted by the Bank, ICICI Bank counsel said notice would be sent to a defaulter asking him either to pay the installments or hand over the vehicle purchased on loan, failing which the agents would be asked to seize it. When the Bench pointed out that recovery or seizure could be done only legally, ICICI Bank counsel said, "If we have to go through the legal process it would be difficult to recover the installments as there are millions of defaulters". Taking strong exception to ICICI Bank's use of 'goondas' against a defaulter, the president of Consumer Disputes Redressal Forum said, "The fact leaves us aghast at the manner of functioning and goondaism in which the bank is involved for a petty amount of Rs 1,889... such attitude is deplorable and sends chills down the spine....The bank had the option to recover dues through legal means. They have no legal right to snatch the vehicle in such a manner which amounts to robbery,". In this case recovery agents pointed a pistol at a defaulter when he tried to resist. ICICI bank argued that they had taken peaceful possession of the vehicle "after due intimation to the complainant as he was irregular in remitting the monthly instalments". But the court found out that the records proved otherwise. Two senior ICICI Bank officials were booked for abducting one VikasPorwal from his house and keeping him hostage in the Bank's premises. A Consumer Commission has asked ICICI Bank MD K V Kamath to appear before it in respect a complaint. A borrower on protesting against the forceful dispossession of his car, as seen in the postincident photographs, was roughed up and sustained injuries.

CASE STUDY
This information is for all of you. This is not a forward mail or cooked up story. My parents are the victim in this case. My parents have savings Bank account with ICICI Bank, Panipat Branch. They do not use ATM or do transaction from this bank so often. They took out some money from ATM in the month of December, at that time balance left was over 2 lakh. Next time they went to took out money from ATM in February end and saw that only Rs 231 is left in account. After reporting to Bank employees and checking statement it was found that money has been debited as ATM transactions. (Earlier SMS used to come for money deposited or debited). For these transactions there was no SMS alerts as we used to get earlier for valid transactions. Now interesting thing is that our ATM card is never lost or stolen. This clear shows that some guys made up another ATM card for the same account. There is surely a FRAUD going on. Without the help of Bank Employees how can that be possible? When the same question is put across the Bank Manager he fled away from office seeking some meeting as an excuse. They are not at all cooperating. They showed the clips of person taking out money from Bank and told my father that go, report to police and do whatever you want to do. This is really bad, not at all professional and unethical. I believe it is the responsibility of Bank to provide secure ATMs, not of the customer. WHY A CUSTOMER SHOULD SUFFER??

This is a thing of SHAME for ICICI Bank. Firstly ATMs should be secure, second even if mistake occurs they should accept it and try to rectify that instead of running away from taking responsibility. All of you please regularly keep checking your accounts, it can happen with anyone. I think bank is sleeping we only need to be alert. This is again an irony.

HDFC Bank:
Introduction:
HDFC Bank Limited (BSE: 500180, NSE: HDFCBANK, NYSE: HDB) is an Indian financial services company that was incorporated in August 1994. HDFC Bank is the fifth or sixth largest bank in India by assets and the second largest bank by market capitalization as of February 24, 2012. The bank was promoted by the Housing Development Finance Corporation, a premier housing finance company (set up in 1977) of India. HDFC Bank has 1,986 branches and over 5,471 ATMs, in 996 cities in India, and all branches of the bank are linked on an online realtime basis. As of 30 September 2008 the bank had total assets of Rs.1006.82 billion.[3] For the fiscal year 2010-11, the bank has reported net profit of INR3,926.30 crore (US$783.3 million), up 33.1% from the previous fiscal. Total annual earnings of the bank increased by 20.37% reaching at INR24,263.4crore (US$4.84 billion) in 2010-11.[4] HDFC Bank is one of the Big Four banks of India, along with: State Bank of India, ICICI Bank and Punjab National Bank.

Type Traded as

Public BSE: 500180 NSE: HDFCBANK NYSE: HDB BSE SENSEX Constituent Banking, Financial services August 1994

Industry Founded

Headquarters Mumbai, Maharashtra, India Area served Key people Products Worldwide Aditya Puri (MD) Credit cards, consumer banking, corporate banking,finance and insurance,investment banking, mortgage loans, private banking, private equity, wealth management[1] US$ 5.585 billion (2011)[2] US$ 923.8 million (2011)[2] US$ 65.483 billion (2011)[2] US$ 7.769 million (2011)[2] 55,752 (2011)[2] HDFCBank.com

Revenue Profit Total assets Total equity Employees Website

Distribution network:
An HDFC Bank Branch HDFC Bank is headquartered in Mumbai and has a As of March 31, 2012, the Banks distribution network was at 2,544 branches and 8,913 ATMs in 1,399 cities as against 1,986 branches and 5,471 ATMs in 996 cities as of March 31, 2011.

Corporate History
HDFC Bank was incorporated in 1994 by Housing Development Finance Corporation Limited (HDFC), India's largest housing finance company. It was among the first companies to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector. The Bank started operations as a scheduled commercial bank in January 1995 under the RBI's liberalization policies. Times Bank Limited (owned by Bennett, Coleman & Co. / Times Group) was merged with HDFC Bank Ltd., in 2000. This was the first merger of two private banks in India. Shareholders of Times Bank received 1 share of HDFC Bank for every 5.75 shares of Times Bank. In 2008 HDFC Bank acquired Centurion Bank of Punjab taking its total branches to more than 1,000. The amalgamated bank emerged with a base of about Rs. 1, 22,000crore and net advances of about Rs.89,000 crore. The balance sheet size of the combined entity is more than Rs. 1, 63,000crore.

Business focus:
HDFC Bank deals with three key business segments. - Wholesale Banking Services, Retail Banking Services, Treasury. It has entered the banking consortia of over 50 corporates for providing working capital finance, trade services, corporate finance, and merchant banking. It is also providing sophisticated product structures in areas of foreign exchange and derivatives, money markets and debt trading and equity research. Wholesale banking services: Blue-chip manufacturing companies in the Indian crop to small & midsized corporate and agri-based businesses. For these customers, the Bank provides a wide range of commercial and transactional banking services, including working capital finance, trade services, transactional services, cash management, etc. The bank is also a leading provider of [clarification needed] for its corporate customers, mutual funds, stock exchange members and banks.

Retail banking services:

HDFC Bank was the first bank in India to launch an International Debit Card in association with VISA (Visa Electron) and issues the MasterCard Maestro debit card as well. The Bank launched its credit card business in late 2001. By March 2009, the bank had a total card base (debit and credit cards) of over 13 million. The Bank is also one of the leading players in the merchant acquiring business with over 70,000 Point-of-sale (POS) terminals for debit / credit cards acceptance at merchant establishments. The Bank is positioned in various net based B2C opportunities including a wide range of internet banking services

for Fixed Deposits, Loans, Bill Payments, etc. With Finest of Technology and Best of Man power in Banking Industry HDFC BANK's retail services have become by and large the best in India and since the contribution to CASAi,e total number of current and savings account of more than 50% ,HDFC BANK has full potential to become Indias No.1 Private Sector Bank.

Treasury:
Within this business, the bank has three main product areas - Foreign Exchange and Derivatives, Local Currency Money Market & Debt Securities, and Equities. These services are provided through the bank's Treasury team. To comply with statutory reserve requirements, the bank is required to hold 25% of its deposits in government securities. The Treasury business is responsible for managing the returns and market risk on this investment portfolio. Frauds done by HDFC Bank:

HDFC Bank Limited Credit Card Fraud Transaction

Bhargav Rajgor having HDFC credit card, card no.4346-7810-13968565 would like to inform you about frauds transaction are done on his above mentioned card, on 18/01/20012 at 11:47 pm He had received a sms which mentioned transaction of INR7900.00. On credit card xxxx8586 to ETSAFE POS D. As per the telephonic discussion with customer care executive told him to fill the dispute form in writing and submit to nearest HDFC Bank ATM center and he lodge my complaint and provide me with service request number. Addition to this he have submitted an application with police station near to his residence fir the same.

How this transaction are happening with the HDFC Bank credit card holder only to the same vendor.

HDFC Car loan fraud

My self suman bhardwaj from vill awari po bhager distt. bilaspur HP 174021 and I plan to purchase a car I discuss to my friend he referred a per named Kumar mobile no is 9418014441. He meet to and I decide that I will Purchase alto k10 or Eon next day he send me a car Eon I said that how fast is your bank. He said chalti hai sir. I tell him that in this car what is less as per your commitment he said ye bhi karva denge after 35 day when loan is approved by HDFC that he requires a bank account the three person come to me says that we are from HDFC and in your city the bank is opening in two three month so you open your account. I agree to open a account but I tell him that it is not possible that HDFC open a branch in my small city. After a week a get a SMS message from HDFC that your loan application is disbursed for amount 251000/- then I surprised because kumar has committed me different that your loan is 241000/- and EMI is 5300/- but my loan amount is 251000/- and EMI is 5850/- Means rate of interest is higher and loan amount is 10000/- more. I call to HDFC he said that we put the case as terms and conditions. But from me no one ask how much loan you want to take. And Mr. Kumar who is agent of HDFC had done totally fraud he not provide me the caralto k10 and take the loan from HDFC without my consent. He must take their car and cancel the loan If HDFC fail to do this then I have also no liability to HDFC bank to pay any Loan. I want to purchase a car a person meet to me through my friend and tell that I refer your case to HDFC Mandi Himachal Pradesh and rate of interest is 6.5% and calculate The EMI 5300/- for a loan of 241000/-. And Take over the document from me. After after two three days he send a car without any Intimation to me. I return his car to him immediately After 35 days a SMS to me that " Dear Customer, First

EMI is Rs 5850 on 07-Aug-12 is Rs 5850/- on HDFC BANK Limited Loan #21816046 EMI Frequency is Month T&C apply." and other SMS is Dear Sir, Loan application of Suman Kumar of auto loan Brand Hyundai EON D Lite Solid, LOS no. 21816046 is disbursed for loan amount 251438. I notice to HDFC branch Mandi by phone but they said that contact to that Person. Which is totally wrong commitment I have no any Loan and liability to HDFC Because they Do not final the loan in my presence and my commitment.

HDFC Bank Personal Loan

Ashok Kumar Jain, having saving account in HDFC Bank had taken a loan from 3 - 1/2 yr back. Since then I am paying my installments on regular basis. But in March 2009 due to need of funds by bank, they had deducted installments twice in my account. I am requesting them to refund the borrowed amount (rs 5000) but they even refused to reply in appropriate manner. Now I m going to consumer court as well as to RBI for the resolution of the query.

A fraud online transaction done from my HDFC bank account

Sameer Dubey from Lucknow. I am using HDFC Bank Account from around 4 years. On 26th Jan 11 i deposited Rs.2.70 Lakhs in my account and the same day someone has fraudulently took out 17500Rs./- from my account and has recharged Vodafone mobile of Rs.1500 for 5 times and Rs.10000 of some online recharge. I received a call from bank at around 11.30pm about confirming if i have made such deal and i told them that i am not making any transaction and immediately i blocked my HDFC debit and credit cards. I complained the same next day to the branch where my account was opened and the Mr.U.Khan Branch Manager of HDFC Bank Puraniya branch Lucknow. The reply i am getting from the bank is shocking, insulting and unethical to me as they are blaming me that i have compromised the card details with some to do this and as this is a case of pushing their will be no refund to me. I am really shocked by his behavior as i was one of the highly value clients of him. HDFC Bank is practicing such ethical and fraudulent acts as last month i got a call from the HDFC credit card department that as benign a high value credit card client of them they are issuing me a health policy of Rs.8500/- approx. which i have to take and i need to pay for this policy even though i didnt wanted any insurance. Finally i took this policy as they told that its by default give to all the credit card holders of the bank. Please kindly look in to the matter as the bank is not responding to my complaint.

Types of Fraud

Fraud can be classified into two: Offline fraud and online fraud

Offline frauds:
Most offline fraud incidences happen as a result of theft of your mail, sensitive information related to your bank or credit card accounts, stolen atm/debit/credit cards, forged/ stolen cheques etc. You can protect yourself from such instances by exercising caution while receiving, storing and disposing your account statements as well as your cheques, atm/debit and credit cards.

Online frauds:
Online fraud occurs when someone poses as a legitimate company (that may or may not be in order to obtain sensitive personal data and illegally conducts transactions on your existing accounts. Often called "phishing" or "spoofing", the most current methods of online fraud are usually through fake emails, Web sites and pop-up windows, or any combination of such methods. The main objective of both offline as well as online fraud is to steal your 'identity'. This phenomenon is commonly known as "identity theft". Identity theft occurs when someone illegally obtains your personal information - such as your credit card number, bank account number, or

other identification and uses it repeatedly to open new accounts or to initiate transactions in your name. Identity theft can happen even to those who do not shop, communicate, or transact online. A majority of identity theft occurs offline. Stealing wallets and purses, intercepting or rerouting your mail, and rummaging through your trash are some of the common tactics that thieves can use to obtain personal information. The more you are aware about identity theft the better prepared you will be.

Mechanics of bank frauds:

1. Wire fraud:
Wire transfer networks such as the international interbank fund transfer system are tempting as targets as a transfer, once made, is difficult or impossible to reverse. As these networks are used by banks to settle accounts with each other, rapid or overnight wire transfer of large amounts of money are commonplace; while banks have put checks and balances in place, there is the risk that insiders may attempt to use fraudulent or forged documents which claim to request a bank depositor's money be wired to another bank, often an offshore account in some distant foreign country.

2. Rogue traders:
A rogue trader is a highly placed insider nominally authorized to invest sizeable funds on behalf of the bank; this trader secretly makes progressively more aggressive and risky investments using the bank's money, when one investment goes bad, the rogue trader engages in further market speculation in the hope of a quick profit which would hide or cover the loss. Unfortunately, when one investment loss is piled onto another, the costs to the bank can reach into the hundreds of millions of dollars; there have even been cases in which a bank goes out of business due to market investment losses.

3. Fraudulent loans:
One way to remove money from a bank is to take out a loan, a practice bankers would be more than willing to encourage if they know that the money will be repaid in full with interest. A fraudulent loan, however, is one in which the borrower is a business entity controlled by

a dishonest bank officer or an accomplice; the "borrower" then declares bankruptcy or vanishes and the money is gone. The borrower may even be a non-existent entity and the loan merely an artifice to conceal a theft of a large sum of money from the bank. Forged or fraudulent documents: Forged documents are often used to conceal other thefts; banks tend to count their money meticulously so every penny must be accounted for. A document claiming that a sum of money has been borrowed as a loan, withdrawn by an individual depositor or transferred or invested can therefore be valuable to a thief who wishes to conceal the minor detail that the bank's money has in fact been stolen and is now gone.

4. Uninsured deposits
There are a number of cases each year where the bank itself turns out to be uninsured or not licensed to operate at all. The objective is usually to solicit for deposits to this uninsured "bank", although some may also sell stock representing ownership of the "bank". Sometimes the names appear very official or very similar to those of legitimate banks. For instance, the "Chase Trust Bank" of Washington D.C. appeared in 2002with no license and no affiliation to its seemingly apparent namesake; the real Chase Manhattan Bank is based in New York. There is a very high risk of fraud when dealing with unknown or uninsured institutions. The risk is greatest when dealing with offshore or Internet banks (as this allows selection of countries with lax banking regulations), but not by any means limited to these institutions.

5. Demand draft fraud

Demand draft fraud is usually done by one or more dishonest bank employees. They remove few DD leaves or DD books from stock and write them like a regular DD. Since they are insiders, they know the

coding, punching of a demand draft. These Demand drafts will be issued payable at distant town/city without debiting an account. Then it will be cashed at the payable branch. For the paying branch it is just another DD. This kind of fraud will be discovered only when the head office does the branch-wise reconciliation, which normally will take 6 months. By that time the money is unrecoverable. By others:

6 .Forgery and altered cheques

Thieves have altered cheques to change the name (in order to deposit cheques intended for payment to someone else) or the amount on the face of a cheque (a few strokes of a pen can change Rs.10000 into Rs.100 ,000,although such a large figure may raise some eyebrows).Instead of tampering with a real cheque, some fraudsters will attempt to forge a depositor's signature on a blank cheque or even print their own cheques drawn on accounts owned by others, non-existent accounts or even alleged accounts owned by non-existent depositors. The cheque will then be deposited to another bank and the money withdrawn before the cheque can be returned as invalid or for nonsufficient funds

7. Stolen cheques
Some fraudsters obtain access to facilities handling large amounts of cheques, such as a mailroom or post office or the offices of a tax authority(receiving many cheques) or a corporate payroll or a social or veterans' benefit office (issuing many cheques). A few cheques go missing; accounts are then opened under assumed names and the cheques (often tampered or altered in some way) deposited so that the money can then be withdrawn by thieves. Stolen blank cheque books are also of value to forgers who then sign as if they were the depositor

8. Accounting fraud
In order to hide serious financial problems, some businesses have been known to use fraudulent bookkeeping to overstate sales and income, inflate the worth of the company's assets or state a profit when the company is operating at a loss. These tampered records are then used to seek investment in the company's bond or security issues or to make fraudulent loan applications in a final attempt to obtain more money to delay the inevitable collapse of an unprofitable or mismanaged firm. Accounting fraud has also been used to conceal other theft taking place within a company.

9. Bill discounting fraud

Essentially a confidence trick, a fraudster uses a company at their disposal to gain confidence with a bank, by appearing as a genuine, profitable customer. To give the illusion of being a desired customer, the company regularly and repeatedly uses the bank to get payment from one or more of its customers. These payments are always made, as the customers in question are part of The fraud, actively paying any and all bills raised by the bank. After time, after the bank is happy with the company, the company requests that the bank settles its balance with the company before billing the customer. Again, business continues as normal for the fraudulent company, its fraudulent customers, and the unwitting bank. Only when the outstanding balance between the bank and the company is sufficiently large, the company takes the payment from the bank, and the company and its customers disappear, leaving no-one to pay the bills issued by the bank

10. Cheque kiting

Chequekiting exploits a system in which, when a cheque is deposited to a bank account, the money is made available immediately even though it is not removed from the account on which the cheque is drawn until the cheque actually clears. Deposit Rs.1000 in one bank, write a cheque on that amount and deposit it to your account in another bank; you now have Rs2000 until the cheque clears. In-transit or non-existent cash is briefly recorded in multiple accounts. A cheque is cashed and, before the bank receives any money by clearing the cheque, the money is deposited into some other account or withdrawn by writing more cheques. In many cases, the original deposited cheque turns out to be a forged cheque. Some perpetrators have swapped checks between various banks on a daily basis, using each to cover the shortfall for a previous cheque. What they were actually doing was check kiting; like a kite in the wind, it flies briefly but eventually has to come back down to the ground

11.Payment card fraud:

Credit card fraud is widespread as a means of stealing from banks, merchants and clients. A credit card is made of three plastic sheet of polyvinyl chloride. The central sheet of the card is known as the core stock. These cards are of a particular size and many data are embossed over it. But credit cards fraud manifest in a number of ways. They are: Genuine cards are manipulated Genuine cards are altered Counterfeit cards are created Fraudulent telemarketing is done with credit cards Genuine cards are obtained on fraudulent applications in the names/addresses of other persons and used. It is feared that with the

expansion of E-Commerce, M-Commerce and Internet facilities being available on massive scale the fraudulent fund freaking via credit cards will increase tremendously.

i) Booster cheques:
A booster cheque is a fraudulent or bad cheque used to make a payment to a credit card account in order to "bust out" or raise the amount of available credit on otherwise-legitimate credit cards. The amount of the cheque is credited to the card account by the bank as soon as the payment is made, even though the cheque has not yet cleared. Before the bad cheque is discovered, the perpetrator goes on a spending spree or obtains cash advances until the newly-"raised" available limit on the card is reached. The original cheque then bounces, but by then it is already too late

ii) Stolen payment cards:

Often, the first indication that a victim's wallet has been stolen is a phone call from a credit card issuer asking if the person has gone on a spending spree; the simplest form of this theft involves stealing the card itself and charging a number of high-ticket items to it in the first few minutes or hours before it is reported as stolen. A variant of this is to copy just the credit card numbers (instead of drawing attention by stealing the card itself) in order to use the numbers in online frauds. The use of a four digit Personal Identity Number (PIN) instead of a signature helps to prevent this type of fraud.

iii) Duplication or skimming of card information:

This takes a number of forms, ranging from a dishonest merchant copying clients' credit card numbers for later misuse (or a thief using carbon copies from old mechanical card imprint machines to steal the info) to the use of tampered credit or debit card readers to copy the magnetic stripe from a payment card while a hidden camera captures the numbers on the face of the card. Some thieves have surreptitiously added equipment to publicly accessible automatic teller machines; a fraudulent card stripe reader would capture the contents of the magnetic stripe while a hidden camera would sneak a peek at the user's PIN. The fraudulent equipment would then be removed and the data used to produce duplicate cards that could then be used to make ATM withdrawals from the victims' accounts.

12. Empty ATM envelope deposits:

A criminal overdraft can result due to the account holder making a worth less or misrepresented deposit at an automated teller machine in order to obtain more cash than present in the account or to prevent a check from being returned due to non-sufficient funds. The crime could also be perpetrated against another person's account in an "account takeover" or with counterfeit ATM card, or an account opened in another person's name as part of an identity theft scam. This scenario may become a thing of the past next decade due to the emergence of ATM deposit technology that scans currency and checks without using an envelope.

14. Impersonation:
Impersonation has become an increasing problem; the scam operates by obtaining information about an individual, then using the information to apply for identity cards, accounts and credit in that person's name. Often

little more than name, parents' name, date and place of birth are sufficient to obtain a birth certificate; each document obtained then is used as identification in order to obtain more identity documents. Government-issued standard identification numbers such as "social security numbers"PAN numbers are also valuable to the fraudster. Information may be obtained from insiders (such as dishonest bank or government employees), by fraudulent offers for employment or investments (in which the victim is asked for a long list of personal information) or by sending forged bank or taxation correspondence. In some cases, a name is needed to impersonate a citizen while working as an illegal immigrant but often the identity thieves are using the bogus identity documents in the commission of other crimes or even to hide from prosecution for past crimes. The use of a stolen identity for other frauds such as gaining access to bank accounts, credit cards, loans and fraudulent social benefit or tax refund claims is not uncommon. Unsurprisingly, the perpetrators of such fraud have been known to take out loans and disappear with the cash, quite content to see the wrong persons blamed when the debts go bad or the police come calling.

15. Fraudulent loan applications

These take a number of forms varying from individuals using false information to hide a credit history filled with financial problems and unpaid loans to corporations using accounting fraud to overstate profits in order to make a risky loan appear to be a sound investment for the bank. Some corporations have engaged in over-expansion, using borrowed money to finance costly mergers and acquisitions and overstating assets, sales or income to appear solvent even after becoming seriously financially over extended.

16. Prime bank fraud:

The "prime bank" operation which claims to offer an urgent, exclusive opportunity to cash in on the best-kept secret in the banking industry, guaranteed deposits in "prime banks", "constitutional banks", "bank notes and bank-issued debentures from top 500 world banks", "bank guarantees and standby letters of credit" which generate spectacular returns at no risk and are "endorsed by the World Bank" or various national governments and central bankers. However, these officialsounding phrases and more are the hallmark of the so-called "prime bank" fraud; they may sound great on paper, but the guaranteed offshore investment with the vague claims of a easy 100% monthly return are all fictitious financial instruments intended to defraud individuals.

17. Phishing and Internet fraud:

Phishing operates by sending forged e-mail, impersonating an online bank, auction or payment site; the e-mail directs the user to a forged web site which is designed to look like the login to the legitimate site but which claims that the user must update personal info. The information thus stolen is then used in other frauds, such as theft of identity or online auction fraud. Phishing means sending an e-mail that falsely claims to be a particular enterprise and asking for sensitive financial information. Phishing, thus, is an attempt to scam the user into surrendering private information that will then be used by the scammer for his own benefit. Phishing uses 'spoofed' e-mails and fraudulent Web sites that look very similar to the real ones thus fooling the recipients into giving out their personal data. Most phishing attacks ask for credit card numbers, account usernames and passwords. According to statistics phishes are able to convince up to five per cent of the recipients who respond to them

18. Money laundering:

Money laundering has been used to describe any scheme by which the true origin of funds is hidden or concealed. The operations work in various forms. One variant involved buying securities (stocks and bonds) for cash; the securities were then placed for safe deposit in one bank and a claim on those assets used as collateral for a loan at another bank. The borrower would then default on the loan. The securities, however, would still be worth their full amount. The transaction served only to disguise the original source of the funds.

19. Forged currency notes:

Paper currency is the usual mode of exchange of money at the personal level, though in business, cheques and drafts are also used considerably. Bank note has been defined in Section 489A.If forgery of currency notes could be done successfully then it could on one hand made the forger millionaire and the other hand destroy the economy of the nation. A currency note is made out of a special paper with a coating of plastic laminated on both sides of each note to protect the ink and the anti forgery device from damage. More over these notes have security threads, water marks. But these things are not known to the majority of the population. Forged currency notes are in full circulation and its very difficult to catch hold of such forgers as once such notes are circulated its very difficult to track its origin.

20. Computer Frauds:

Computerization has brought advantages of efficiency, speed and economy in all spheres of life. It is a very powerful tool and provides opportunities of efficiency and speed to everybody using it. Further, the vast increase in the memory (whether RAM or storage) and processing

speeds as well as availability of wide range of software, particularly Internet and web-based applications i.e. connectivity, have made them pervade all aspects of our lives. This has also brought large economy of scale particularly in our economic environment and we are becoming more and more dependent on computers and their networks for the services such systems deliver. Frauds committed using computers vary from complex financial frauds where large amounts are illegally transferred between accounts by sophisticated hackers, to the simpler frauds where computer is only a tool that a criminal uses to commit a crime. It also provides ample opportunities for their misuse particularly for economic or financial gains. This is as computers networks can also be used to commit crimes from geographically far places. Such computer frauds are known by various names such as cyber crimes or ecrimes and we can describe them as an act involving computer equipment, software or data that results in an unauthorized financial advantage. Worldwide frauds in computerized environment cause losses running into very large sums. Although in India, frauds committed so far have not revealed any extensive manipulation of computer systems, it is no doubt a potentially high-risk area, which should be addressed carefully and in timely manner. According to a recent survey, companies in India have not addressed security issues appropriately.

Frauds- Prevention and Detection:

A close study of any fraud in bank reveals many common basic features. There may have been negligence or dishonesty at some stage, on part of one or more of the bank employees. One of them may have colluded with the borrower. The bank official may have been putting up with the borrowers sharp practices for a personal gain. The proper care which was expected of the staff, as custodians of banks interest may not have been taken. The banks rules and procedures laid down in the Manual instructions and the circulars may not have been observed or may have been deliberately ignored.

Prevention of frauds:
i) Internal Prevention:
It is said that failures are the stepping stone for success. What this means is that if we are able to analyses why a particular failure by way of a fraud took place, we can then detect the loopholes in our system which led to the fraud and take corrective measures or change the system. For instance the great Harshad Mehta scam took place because among other things, the public debt office of the Reserve Bank of India was not computerized and was operating on a manual system. This gave a float of fifteen days, which gave opportunity for people like Ketan Parekh to perpetrate the fraud. Even after this scam while in the case of the RBI the defect was rectified the overall banking system is still manual. Only 5000 out of the 65000 branches of banks are computerized. In today's competitive market, it is necessary that the banks are able to service their clients effectively. Therefore strongly urge is that we should have a massive effort at computerization of the banks.

Execution of Documents:

1. A bank officer must adopt a strict professional approach in the execution of documents. The ink and the pen used for the execution must be maintained uniformly. 2. Bank documents should not be typed on a typewriter for execution. These should be invariably handwritten for execution. 3. The execution should always be done in the presence of the officer responsible for obtain them, 4. The borrowers should be asked to sign in full signatures in same style throughout the documents. 5. Unless there is a specific requirement in the document, it should not begot attested or witnessed as such attestation may change the character of the instruments and the documents may subject to stamp duty. 6. The paper on which the bank documents are made should be pilfering proof .It should be unique and available to the banks only. 7. The printing of the bank documents should have highly Artistic intricate and complex graphics. 8. The documents executed between Banker and Borrowers must be kept in safe custody, One issue when a fraud is perpetrated is who should be held responsible. For instance in the case of the borrower-based accounts, there is the person who posts the accounts, there is the person who passes the instrument and, there is a third person who makes the payment. It has been suggested that there must be a method of isolating the person who

makes the payment from the people who make the posting or pass the order. The relative responsibility of the three will have to be fixed. This is an issue that has been raised before me by one of the Chairman of the banks. Perhaps in a programmers like this we will be able to go into such issues and evolve guidelines about what should be done so that while the innocent is not punished, the guilty are not spared. Another issue, which is of importance to the Indian economy. This is there ported fear of many officers, especially in the middle levels in the banks, to take decisions regarding dispersal of funds. As a result, there is always a tendency to push the case upwards and the whole banking system is operating in a sub-optimal manner. We must be able to find a solution to this. In fact, the whole vigilance function can become an effective function for economic growth if we are able to create an environment in which the honest are encouraged to take the decision and the dishonest are punished quickly. Bank frauds are the failure of the banker. It does not mean that the external frauds do not defraud banks. But if the banker is upright and knows his job, the task of defrauder will become extremely difficult, functions is now an imperative. Increasingly, whether we like it or not, all banking transactions are going to be electronic. The thrust is on commercially important centers, which account for 65 percent of banking business in terms of value. There are now a large number of fully computerized branches across the country.

a) Appropriate controls:
The first steps in prevention of frauds in computerized systems involve setting up of proper access controls both physical and logical. The physical protection of Information System assets means physical control

of access to computer and network systems and the devices to which they are connected. Access to these systems could be controlled by security guards, installation of code locks, smartcard driven door opening devices or modern biometric devices (which control the access on the basis of certain individual characteristics such as finger-prints, eyes retina image etc., which cannot be changed or falsified) However, in a computerized environment, logical access controls (i.e. controls to operating systems, data-base systems as well as application systems) play more important role. Adequate controls over system software and data is done by keeping a strict control over functional division of labor between all classes of employees, keeping in mind the principle of least privilege and that maker and checker. A clear segmentation of access to system engineers, programmers and administrators is also done depending on their work responsibility .Information System Auditors / Security Management must exercise a great deal of creativity in identifying ways in which unauthorized users could gain access. Hence, the first step in prevention of computer frauds is setting up of the appropriate controls

b)Proper Implementation;
Second step in prevention of frauds would be to ensure that the users properly implement the control systems. Control measures could be either software driven like passwords or system driven like exception reports and transaction authorization processes. In this connection, it may be noted that access controls are a system in themselves and existence of such controls means existence and maintenance of such control systems. In the case of passwords, as access control measures. It may be noted that merely having passwords is not sufficient. It should

also be ensured that password have been prescribed to have certain minimum characters, are stored in encrypted files, there is a forced change of passwords at the time of first login as well as after a specified period. These features however depend on the security policy of the organization. Systems are also designed to keep a chronological record of the events occurring in the system (i.e. commands executed by the users, actions on files, messages displayed by the system, resources consumption by the users, transaction entry and security violations) in the form of audit trails. These can be built in operating systems, database management systems neither be predicted nor tested. Even when the best of the access controls tools are used and monitored, when data flows from within the network through data communication lines or from one network to another or through Internet, protection of the data becomes an important tool for prevention of frauds. For this, one can either depend on simple processes like check sum or hash totals built in the software or may require using encryption technology or cryptography. The complexity and cost of implementation of these methods varies a lot and is, hence, decided by the risk element.

Examples:
1) When data relating to inter-branch reconciliation flows through network simple processes like check sum or hash totals may suffice. However, in the case of INFINET used for Real Time Gross Settlement, which uses dial-up connections, leased lines as well as VSAT technology for access, use of Public Key Infrastructure (PKI) with a larger key-size is necessitated. 2) Firewalls for computer networks are another important tool in prevention of frauds when access is allowed across networks or Internet. They are used to enforce an access control policy across the networks. They allow only authorized traffic to pass and prevent unauthorized access. They also protect sensitive data and provide audit or logging information. As such they provide a focal point for monitoring and log access to the network and thus limit exposure of network services. 3) Present technology also makes us available what is called as Intruder Detection Systems (IDS). IDS are systems build up to detect intruders entering the network. It is the process of identifying and responding to malicious activity targeted at computing and networking resources and is important component of defensive measures protecting computer system and networks from abuses.

Detection of Frauds:
Internal detection:
Despite all care and vigilance there may still be some frauds, though their number, periodicity and intensity may be considerably reduced. The following procedure would be very helpful if taken into consideration: 1. All relevant data-papers, documents etc. Should be promptly collected. Original vouchers or other papers forming the basis of the investigation should be kept under lock and key. 2 .All persons in the bank who may know something about the time, place a modus operandi of the fraud should be examined and their statements should be recorded. 3. The probable order of events should thereafter be reconstructed by the officer, in his own mind.4.It is advisable to keep the central office informed about the fraud and further developments in regard thereto One method of detection will be only by regular checks and this is where apparently there is slackness today. Ultimately we must be able to create in our banks an atmosphere of trust on the one side and transparency on the other so that frauds if they occur are immediately detected, checked and penalized. Apart from the systems and procedures, ultimately the whole issue boils down to the values we have. Today we are highly tolerant of corruption. We also have in our Hindu philosophy the two basic principles, which seem to indirectly encourage corruption. These are extreme tolerance and the prayaschitta. As a result many people who commit frauds can literally get away freely. Our systems are really to be blamed. As it is seen, if we make a quick analysis of 100 people in any given organization, 10% may be honest and 10%dishonest whatever we

do. 80% depend on the systems we have. And our systems encourage corruption due to the following factors: Scarcity of goods and services Lack of transparency Delay and red tape Cushions of safety that have been built for the corrupt on the healthy Principle that everybody is innocent till proved guilty. We have got voluminous vigilance manuals and the corrupt can find always some method of escaping punishment by exploiting some loophole or other. This must be checked. Do not know to what extent the bank frauds can be attributed to the people in our own banking system that, because of loyalty of the profession or organization, tends to protect the corrupt. Such people may be doing a disservice to the nation. We should therefore be able to evolve ultimately systems which tackle the corruption promoting factors mentioned above so that the punishment of the corrupt becomes a perceived reality and acts as a check for people who have a tendency to commit frauds. After all that is the way for prevention and detection of frauds

ii) External detection:

Despite all such measures, as technology is taking rapid strides (for fraudsters as well as organizations), system security administrators are discovering that they have to constantly improve upon the technological tools. However, security can only reduce the possibility of fraud and not totally rule it out. In a computerized environment, the perpetrators of fraud also expect their crime to be near impossible to detect among the thousands or millions of transactions processed by the organization. Hence to reduce the losses, timely detection of the frauds plays an important role. Bank computer crimes have a typical feature, the evidence relating to crime is intangible. The evidences can be easily erased, tampered or secreted. More over it is not easily detectable. More over the evidence connecting

the criminal with the crime is often not available. Computer crimes are different from the usual crimes mainly because of the mode of investigation. There are no eye witness, no usual evidentiary clues and no documentary evidences. It is difficult to investigate for the following reasons:

Hi-tech crime:
The information technology is changing very fast. The normal investigator does not have the proper background and knowledge .special investigators have to be created to carry out the investigations. The FBI of USA have a cell, even in latest scenario there has been cells operating in the Maharashtra police department to counter cyber crimes. C.B.I also have been asked to create special team for fighting cyber crimes

International crime:
A computer crime may be committed in one country and the result can be in another country. There has been lot of jurisdictional problem a though the Interpol does help but it too has certain limitations. The different treaties and conventions have created obstructions in relation to tracking of cyber criminal shading or operation in other nations

No-scene crime:
The computer satellite computer link can be placed or located anywhere. The usual crime scene is the cyber space. The terminal may be anywhere and the criminal need not indicate the place. The only evidence a criminal leaves behind is the loss to the crime.

Faceless crime:
The major advantage criminal has in instituting a computer crime is that there is no personal exposure, no written documents, no signatures, no fingerprints or voice recognition. The criminal is truly and in strict sense faceless. There are certain spy softwares which is utilized to find out passwords and other vital entry information to a computer system. The entry is gained through a spam or bulk mail. The existing enacted laws of India are not at all adequate to counter cyber crimes. The Indian Penal code, evidence act, and criminal procedure code has no clue about computers when they were codified. It is highly required to frame and enact laws which would deal with those subjects which are new to the country specially cyber law; Intellectual property right etc. The Reserve Bank of India has come up with different proposals to make the way easier, they have enacted electronic fund transfer act and regulations, have amended, The Reserve Bank of India Act, Bankers Book Evidence Act etc experience of India in relation to information and technology is limited and is in a very immature state. It is very much imperative that the state should seek the help of the experienced and developed nations. As the success of the fraudster depends on how fast their crime is detected among very large number of transactions processed by the organization, auditors and fraud investigators find that computers are their best tools for detection of fraud. Powerful, interactive software that quickly sifts through mountains of electronic data enables auditors to effectively detect and prevent fraud throughout an organization. The benefit is speed. One such tool is the General Audit Software (like ACL Audit Command Language and IDEA - Interactive Data Extraction & Analysis). Such tools can quickly compare and analyze data to identify patterns and trends that often reveal fraudulent activity. For effectively detecting and preventing fraud, one must be able to recognize fraud and its symptoms. Auditors have been trained to look

for anomalies and a data analysis tool can highlight anomalies quickly. However, while gathering evidence for fraud, one will have to be little creative and examine closely any indication of fraud, however, small. In other words, to uncover a fraud, one must think like a thief and not as an auditor. In fact, as such crimes can be committed by comparatively with much less investment and gains to fraudsters may be beyond geographic boundaries. Another way to use such software for prevention of fraud could be identifying organizations risks and exposures and assembling fraud profiles for targeted audits. One should not forget that, in a computerized environment, frauds increase, as fraudsters believe their action near impossible to detect, if detected near impossible to prove, if proved nearly impossible to convict and if convicted, amounts nearly impossible to recover. The problem is compounded in networked banks operating in different nations with different laws. Despite this, it has been observed that frauds perpetrated from across the globe have been detected and amounts recovered by proper combination of technology and sleuthing skills. Hence, while security administrators continually watch incidences and plug the holes, fraud investigators improve their skills and actively liaise with authorities to improve the legal framework

Conclusion:

Frauds are an inseparable part of any business. And so Banks too will have to deal with frauds no matter what level of security and scrutiny they build in. This is further complicated by the fact. Those fraudsters keep devising newer techniques of executing financial frauds. This requires banks to invest in state-of-the-art IT systems to monitor, detect, block, investigate, analyze and prevent fraudulent transactions. Complicated models need to be developed which are capable of identifying fraud transactions by assigning it a fraud risk score. If we are able to analyses why a particular failure by way of a fraud took place, we can then detect the loopholes in our system which led to the fraud and take corrective measures or change the system. A case management system is required to keep an ordered record of different fraud instances, the investigations into the frauds and Reimbursement to clients where required. Implementing the best of breed process and sophisticated systems requires constant investment in IT systems and processes. While the big banks, with huge IT budgets can afford to invest heavily in antifraud systems, the regional banks, with limited IT budgets, are not able to do so. Hence, they are increasingly being targeted by Fraudster In today's competitive market, it is necessary that the banks are able to service their clients effectively. Therefore strongly urge is that we should have a massive effort at computerization of the banks.